Over the past 10 years The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) has grown its dividend payouts from $1.6 to $1.76. With a market cap of US$2.0b, Bank of N.T. Butterfield & Son pays out 44% of its earnings, leading to a 4.8% yield. Let me elaborate on you why the stock stands out for income investors like myself.
What Is A Dividend Rock Star?
It is a stock that pays a reliable and steady dividend over the past decade, at a rate that is competitive relative to the other dividend-paying companies on the market. More specifically:
- It is paying an annual yield above 75% of dividend payers
- It consistently pays out dividend without missing a payment or significantly cutting payout
- Its dividend per share amount has increased over the past
- It is able to pay the current rate of dividends from its earnings
- It is able to continue to payout at the current rate in the future
High Yield And Dependable
Bank of N.T. Butterfield & Son's dividend yield stands at 4.8%, which is high for Banks stocks. But the real reason Bank of N.T. Butterfield & Son stands out is because it has a proven track record of continuously paying out this level of dividends, from earnings, to shareholders and can be expected to continue paying in the future. This is a highly desirable trait for a stock holding if you're investor who wants a robust cash inflow from your portfolio over a long period of time.
If there's one type of stock you want to be reliable, it's dividend stocks and their stable income-generating ability. In the case of NTB it has increased its DPS from $1.6 to $1.76 in the past 10 years. It has also been paying out dividend consistently during this time, as you'd expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock.
The current trailing twelve-month payout ratio for the stock is 44%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 42% which, assuming the share price stays the same, leads to a dividend yield of 4.8%. In addition to this, EPS should increase to $3.81.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
Investors of Bank of N.T. Butterfield & Son can continue to expect strong dividends from the stock. With its favorable dividend characteristics, if high income generation is still the goal for your portfolio, then Bank of N.T. Butterfield & Son is one worth keeping around. However, given this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three fundamental factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for NTB’s future growth? Take a look at our free research report of analyst consensus for NTB’s outlook.
- Valuation: What is NTB worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether NTB is currently mispriced by the market.
- Other Dividend Rockstars: Are there strong dividend payers with better fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.